Quarterly Financial Report for the quarter ended September 30, 2021

2. Highlights of fiscal quarter and fiscal year-to-date results

This section presents a variety of financial information as at September 30, 2021, including the authorities available for the year and expenditures incurred during the second quarter, as compared with the previous fiscal year.

The explanation of variances in the amounts is based on the premise that discrepancies of less than 5% have a minimal impact on the interpretation of the results.

The details of this financial information are provided in sections 2.1 and 2.2, and in the tables in the Appendix.

NB: Because of the exceptional situation caused by the COVID-19 pandemic in 2020–21, the House of Commons continued to review the 2020–2021 Main Estimates until December 2020. Full appropriations were only received in December 2020.

IN LIGHT OF THESE CIRCUMSTANCES, COMPARISONS WITH THE PREVIOUS FISCAL YEAR ARE NOT REPRESENTATIVE.

2.1 Authorities analysis

Authorities as at September 30, 2021, totalled $439.7M, compared with $438.2M as at June 30, 2021. The $1.5M (3.4%) variance is considered insignificant.

On a cumulative basis, a year-over-year decrease was reported in CED’s total annual authorities, which stood at $454.1M as at September 30, 2020.

The noted $14.4M (3.2%) downward variance is due to the following changes:

• Vote 1 – Net operating expenditures of +$10.5M;
• Vote 5 – Grants and contributions of +$67.2M;
• Budgetary statutory authorities: -$92.1M.

NB: *In the report, totals may not add up due to rounding.

The chart below shows the annual budgetary appropriation authorities as at September 30, 2021, compared with the previous fiscal year.

Vote 1 authorities (Net Operating Expenditures)

As at September 30, 2021, authorities totalled $43.4M, compared with $32.9M as at September 30, 2020; this represents a yearly increase of $10.5 million (31.9%).

As previously noted, in 2020–21, only 75% of the appropriations in the 2020–2021 Main Estimates had been allocated as at September 30, 2020. The remaining appropriations were received in December 2020, which largely explains this variance.

Vote 5 authorities (Grants and contributions)

As at September 30, 2021, authorities totalled $391.1M, compared with $323.9M as at September 30, 2020. This represents an increase of $67.2 million (20.7%).

This variance consists of a number of components—both upward and downward—resulting in a net increase of $67.2 million:

• Increase In funding
  • Interim supply not received in the second quarter of 2020–2021: +$63.9M
  • Regional Air Transportation Initiative: +$43.1M
  • Regional economic infrastructure development initiative: +$17.4M;
  • Increase in repayable contribution reimbursements: +$9.1M;
  • Black Entrepreneurship Program: +$3.8M;
• Decrease in funding
  • RRRF – REGI: -$52.1M;
  • RRRF – CFP: -$9.3M;
  • Federal jobs and tourism strategy: -$7.5M;
  • Other intergovernmental transfers and adjustments: -$1.2M.

Budgetary statutory authorities

As at September 30, 2021, authorities totalled $5.2M, compared with $97.3M as at September 30, 2020. This represents a net decrease of $92.1M. CED does not have any G&C statutory appropriations this year.

• Decrease in funding
  • RRRF – CFP: -$65M in transfer payments in the form of statutory appropriations;
  • RRRF – REGI: -$25M in transfer payments in the form of statutory appropriations;
  • Canadian Seafood Stabilization Fund: -$2.2M in transfer payments in the form of statutory appropriations;
• Increase In funding
  • Employee benefit plan: +$0.1M.

2.2 Analysis of expenditures

CED expenditures in the second quarter of 2021–2022 totalled $66.2M, compared with $90.5M for the same period last year. This represents a net decrease of $24.3M (26.9%) year-over-year.

This variance can be broken down as follows:

• Vote 1 – Net operating expenditures of +$1.7M;
• Vote 5 – Grants and contributions of -$1.4M;
• Budgetary statutory authorities: -$24.6M.

On a cumulative basis as at September 30, 2021, expenditures amounted to $139.2M, compared with $173.8M for the same period last year. This represents a drop of $34.5M this year.

This variance can be broken down as follows:

• Vote 1 – Net operating expenditures of +$3.2M;
• Vote 5 – Grants and contributions of +$40.2M;
• Budgetary statutory authorities: -$77.9M.

The chart below shows expenditures in the second quarter of 2021–2022 by budgetary appropriation, compared with the previous fiscal year.

Vote 1 expenditures (Net operating expenditures)

CED’s net operating expenditures for the second quarter of 2021–2022 totalled $11.0M, compared with $9.3M in 2020–2021. This represents an increase of $1.7M this year. The increase is largely attributable to a rise in salary expenditures, since additional staff had to be hired to deliver new temporary initiatives and specific COVID-19 initiatives. The lump-sum payments that had to be made to employees this year as compensation for problems with the Phoenix payroll system also contributed to the increase in expenditures. Finally, the renewal of certain collective agreements this year resulted in an increase in salary expenditures.

Cumulative expenditures totalled $21.0M as at September 30, 2021, compared with $17.7M as at September 30, 2020. This represents an increase of $3.2M (18.1%) this year, mainly due to salary and professional services expenditures, for which the pace of payments has increased this year. The gap in professional services is expected to be resolved by the end of the fiscal year.

(For further details on these expenditures, see the table entitled “Departmental budgetary expenditures by standard object” in Appendix 6.2.)

Vote 5 expenditures (Grants and contributions)

Grant and contribution expenditures for the second quarter of 2021–2022 totalled $54.0 million, compared with $55.4M in 2020–2021. The decrease of $1.4M (2.5%) is considered insignificant.

On a cumulative basis as at September 30, 2021, expenditures totalled $115.8M, compared with $75.6M as at September 30, 2020. This represents an increase in spending this year of $40.2M (53.2%).

Primarily, spending on the regular REGI program and the QEDP increased by approximately $14.5M this year. In addition, RRRF (REGI and CFP) spending rose by approximately $25.7M.

Expenditures under budgetary statutory authorities

Spending on statutory authorities in the second quarter of 2021–2022 totalled $1.3M, compared with $25.8M during the same period in 2020–2021. This represents a year-over-year decrease of $24.5M. This difference can be attributed to the $24.6M decrease in transfer payments this year under the RRRF-REGI (statutory appropriations). As was noted above, CED does not have any G&C statutory appropriations this year.

Cumulative expenditures as at September 30, 2021 stood at $2.5M and consist solely of payments under the employee benefit plan. As at September 30, 2020, expenditures amounted to $80.4M. This amount was made up of $2.4M for the employee benefit plan and $78M in G&C statutory appropriation payments under the RRRF-REGI.

(For further details on these expenditures, see the table entitled “Departmental budgetary expenditures by standard object” in Appendix 6.2.)

3. Risks and uncertainties

The consequences of COVID-19 remain at the epicentre of the organization’s risks and uncertainties. The financial solidity of Quebec businesses, both during and after the pandemic, and the repercussions on the global economy, are still key issues. This situation fuels the risk that companies, now more indebted and having exhausted their contingency funds, will be unable to invest in order to pursue their efforts to modernize and ensure the productivity gains needed for their survival and growth.

Programs have been put in place to provide emergency funding for SMEs and economic organizations in all sectors of the economy to allow them to stay in business. This particular type of investment in new industries for the organization and a new clientele during the pandemic increases the risk of non-repayment of contributions, and potentially the workload associated with recovering amounts owing in future years.

Furthermore, the unprecedented volume of these new programs and the speed with which they are being rolled out could pose a risk in that the programs may not include certain preventive and post-processing controls designed to prevent major errors.

To reduce this risk, CED has introduced mitigation strategies to ensure that control measures are sufficient. Agreement management processes have also been simplified as much as possible, for the benefit of clients.

Some technology solutions are reaching the end of their useful life, particularly those related to financial management. There is thus a risk related to the integrity of available data. To mitigate this risk, CED has undertaken a project to replace its financial system with the enterprise solution (SAP) selected by the Office of the Comptroller General. In the meantime, the state of technological solutions is being monitored on an ongoing basis. Controls, specific processes and monitoring have been put in place to ensure that the integrity of financial information is maintained.

At the internal management level, CED will continue to develop financial risk mitigation measures by managing its budgetary and allocation processes through a well-defined framework supported by a series of financial controls. Internal controls over financial reporting, such as entity controls, general IT controls, and business process controls, are only a few examples of mitigation measures designed to support the sound management of public funds by the Department.

4. Significant changes in relation to operations, personnel and programs

In 2020–2021, the Government of Canada set up the Regional Relief and Recovery Fund (RRRF), an ad hoc targeted initiative, initially put in place for one year, with a total budget of $223.6M for CED, in response to the COVID-19 pandemic.

In 2021-2022, the RRRF was extended, and the following funding was added:

• Funding to support small and medium-sized businesses: $39.8M;
• Funding for the Community Futures Network: $6.0M.

Also, since not all of the amounts allocated in 2020–2021 were spent on grants and contributions, the following amounts were carried over to 2021–2022, in addition to the new funding received:

• Funding to support small and medium-sized businesses: $23.0M;
• Funding for the Community Futures Network: $3.0M.

Also in 2021–2022, CED will continue to implement other ad hoc initiatives set up in response to COVID-19, such as the Regional Air Transportation Initiative, the Black Entrepreneurship Program and the Canadian Seafood Stabilization Fund.

Finally, Maxime Garon took up the position of Vice-President of Corporate Services on October 1, 2021; he had previously held this position on an acting basis.

5. Approval of senior officials

The purpose of this section is to provide the approval of senior officials, as required by the Policy on Financial Management, as follows:

Approved by:

6. Appendices

6.1 Statement of authorities (unaudited)

* Includes only authorities available for use and granted by Parliament at quarter-end.

6.2 Departmental budgetary expenditures by standard object (unaudited)

* Includes employee benefit plans (EBPs).

* Includes employee benefit plans (EBPs)